I’d be glad to, if you can enumerate them. As you mentioned, I’m the advocate in this debate, so it’s not my responsibility to point out it’s downsides. It does have some, particularly compared to the return of a true gold standard, but even those are simply theoretical since that is not the world we live in. I shouldn’t have to point out the remote conditions for which bitcoin is likely to fail. It’s my place to point out your errors when you try to do that. Besides, what makes you think that I care about being taken seriously? Bitcoin will succeed or fail on it’s own merits, nothing we say or do here will make any difference in that regard. The only difference I can make here is help others remain relevent.
Name those condtions, and let’s see if I can’t dispute them.
Perhaps I am. Let me rephrase then. Under no conditions for which I am aware can I hide the silver in my pocket during a shakedown at that “checkpoint”. Therefore I can see a grand advantage in the use of Bitcoin as a store of value, particularly while traveling, in any future that a global Internet exists and several possible futures for which one does not.
Happy?
Undoubtedly, we would. Likewise, if the Internet fails in any future that I can imagine, we will also have bigger things to worry about than gold or silver. Again, silver has real anti-microbial, chemical & electrical properties. Gold is just pretty lead that isn’t poisonous, and has few practical uses beyond it’s monetary uses, and that includes industrial uses. Many others have pointed out that gold is unlikely to retain it’s value under such extreme conditions. The vast majority of the value of gold is as a store of value, regardless of just how it gained it’s monetary status, it has it now. So does Bitcoin, so the arguments about whether or not regression theorm should apply or not are moot. Bitcoin has value, and a history of value, and thus an expectation that it will continue to have some value. Thus it does what it claims to do.
3)loss of confidence in markets in general (meaning higher time preferences all around)
4)counterparty erosion
its a convention of rhetoric to acknowledge the weaknesses in your argument, failure to do so makes you less trustworthy. Since bitcoin is a form of credit, you can see how your trustworthiness has bearing on your advocacy.
right, but just like other people need to educate themselves on crypto, you could educate yourself on physical security, and use money that doesnt entail the assumption of risk for the person you are buying from.
thank you for acknowledging that the systemic failure argument applies to bitcoin. Now my answer is that this is akin to saying that “if I get shot or blown up, the fact that the projectiles were composed of radiolucent material is irrelevant, as I have bigger things to worry about.” actually the type of exchange media that one has stored is of prime importance in the discussion of any catastrophic event, and specie has advantages and disadvantages. I prefer canned food and distilled water, and gasoline, but we all know the value density and durability of those goods is much less than Au/Ag.
thats not true, its just that most of those industrial uses are submarginal due to the fact that it makes such good money.
the volatility counts against you here, and you have very limited history to appeal to anyway. Furthermore you beg the question when you suggest that it will have value because of the “expectation” as the critics argue against it based on their expectation that it will not have value.
Exactly the same thing can be said for gold, silver, USD’s or Wiemar Marks; or anyting else for that matter. Perhaps you don’t understand what the term “counterparty risk” actually means?
Suspition confirmed. You don’t understand the terms you are using. If there is counterparty risk, it is because there is a specific & identifiable party that has contracted/promised to exchange for the item even if no one else will. In this case, it’s also the ‘backing’ of a currency. Gold has no backing, it’s gold. Gold certificates, however, have counterparty risk because someone has promised that those certificates can be exchanged for gold with them, even if no one else will accept them at face value. Bitcoin has no counterparty risk, there is no one that promises you something in return for your bitcoins in advance of you accepting them. They have value, or they don’t, entirely independently of any particular promises.
While it’s true that bitcoin requires the ‘network effect’ but it’s also true that every other currency does as well. Fiat currencies have that established by an act of government, bitcoin has done this in an entirely different manner. You are expressing doubt that it is sustainable. That’s your opinion. While mine is different, neither of us can predict the future. There was not one objective statement or logical argument in the above tirade, ergo no need to repudiate your opinoins. I will note this, however; spies and international arms dealers have to eat, too.
False. Just because bitcoin is not money, does not mean that bitcoin must be credit. It is not credit, nor is it debt of another party (another definition of counterparty risk). You earn bitcoins by performing a service or selling a good, therefore it is evidence of valuable worked already performed. One must contribute to the bitcoin economy in advance in order to participate. It’s structurally similar to a LETS system designed for the Internet. Comparing it to systems for which you are already familiar is prone toward error, since it is so different than such systems that most are already aware.
So your argument falls back to, “bitcoin isn’t as good as gold coins traded in person, so it’s a fail”? I’ll be the first to say that bitcoin isn’t as good as gold, but so what? I can’t send my gold around the world, in sub-gram weights, for roughly a nickel’s value, in an hour or less. Bitcoin I can. Bitcoin doesn’t compete with real money anyway, because that is not the reality we live in. We live in the fiat currency world, and in that world, Bitcoin wins hands down.
I’ll also admit that if anyone can design a proof-of-work system that also has an industrial value, that cryptocurrency would eat Bitcoin’s lunch. Again, that’s not the world we live in, and very smart people have been trying to do exactly that for three years. If such a thing were ever found, you would still rail against it because it’s not gold. You’ll keep railing against it until half your own family is using bitcoin to buy stuff online, and then eventually you will just shut up and use it yourself, still beleiving that it has no market use.
Bitcoin is deliberately designed in such manner as to render this risk irrelvent for the majority of Internet users.
Exists. Bitcoin still has a market value.
The risk of gold confiscation also exists, and yet gold still has a market value.
Street muggers exist, yet US FRN’s still have a market value.
This risk isn’t unique to bitcoin.
See above.
An economy cannot be considered a counterpary. No such risk exists.
Acknowledge them, perhaps. Introduce them, no. If you don’t understand the topic well enough to know what the downsides actually are, then they are not likely a large enough of a downside to even mention. How do I know what aspects of bitcoin that others might consider a real concern, unless they are mentioned? Perhaps there are other mitigating factors to even those issues that you don’t understand that would lead to me not considering them a problem. Do your research & know your topic before you engage. A good lawyer never asks a question he doesn’t already know the answer to, and neither do I.
Bitcoin isn’t credit by any common definition of the term. Nor is it credit by an Austrian definition. My own trustworthiness has no bearing on Bitcoin, only on myself.
Bitcoin does not transfer risk. It’s not a debt. And your next argument in favor of a gold standard is that users should educate themselves in the matters of physical security, and then it would be more secure than the automatic security designs of a computer network? I bet you think that you are winning this, don’t you?
Well, you’re welcome. The systemic failure argument applies to every alternative as well.
I agree with that last statement. However, so long as the Internet exists, the density and durability of bitcoins is much greater than Au/Ag.
You just contradicted me and then restated my claim.
Voltility counts against you, too.
A subjective assessment that has no bearing on the statement I made.
I’m not begging the question here, you just don’t understand that I was directly referencing the logic of the Regression Theorm. Users of any currency have an expectation of a particular value range in the future due to the recent history of exchange values. The fact that detractors have an expectation of zero value is inmaterial in this context because these same people don’t have any bitcoin and don’t intend to buy any.
no, the same thing could not happen to gold or silver. As for fiat “money”, that was addressed earlier wherein I described it as a kind of reverse counterparty risk described as “counterparty mandate.” in this kind of situation you know the counterparty is going to fail eventually. Are you sure this reflects favorably on bitcoin, which has no mandate but the same type of risk?
“”““anyting else for that matter””“”
you simply dont understand what money is. Its exchange media that are free from this risk because you can use them yourself for something besides cash. Unless you think you might need to send information pseudonymously bitcoin isnt that for you. Bullion is good for things.
The counterparty is simply the other party in the transaction. Bitcoin is a service, the counterparties are the people who own the computers that provide the service(s). These people are your counterparties, there is risk involved, no amount of hand-waving will change this.
bitcoins are cryptographic patterns, the value of which inheres in the transmission. Its hard for me to see how you dont recognize this as a service, or see that people are agreeing to work on your behalf (by mining bitcoins/verifying patterns). If your problem is that there isnt a written contract, thats a semantic argument and evidence for my position anyway.
I’m pretty sure adjusting ledgers is a service and not a tangible good. Intangible goods are called “services” because they are things people do for you, like changing numbers in accounts, computing cryptographic patterns, or massaging your tired muscles. To the extent that people pay for bitcoins, its because of the expectation of future cryptographic work, and not simply for cryptographic work already done.
quit crying in your lemonade, I never said its a fail
so you think that if people abandon fiat currency they wont use bitcoin?
more ranting that has nothing to do with my actual positions
then those submarginal uses will become affordable and people will use gold for more things and it will appreciate again. What submarginal uses are going to sustain bitcoin through the crashes? Or are you banking on not having any?
What you described certainly can. Anyone can refuse to accept that your gold coins as payment. In our current world, that’s actually likely. What you described isn’t counterparty risk, however. Gold has no counteryparty risk, because there is no one that needs to make you promises in order for it to have exchange value on the open market.
Bitcoin does not have the same type of risk, because there is no counterparty. The risks of a market crash are different than counterparty risks. Counterparty risks exists because some things don’t have a market value without a counterparty, and it’s the creditworthyness of the counterparty that supports it’s value. Insurance is one such product, so are fiat currencies. No one promises you anything with bitcoin, and the verifiable fact that bitcoin has a market value at all proves that it doesnt require such backing to those who understand it.
I understand this point fine, it’s not a relevent point. Bitcoin isn’t money, it’s a currency & a transfer system designed for that currency. Bitcoin still doesn’t have any counterparty risk. Look up the term, please. There is no need to trust me on this matter.
Again, a true yet inmaterial point. Bullion is good for things, sure. It can be used as a material input for manufacturing of particular products. That’s still not what it derives it’s market value from in our modern world. Gold is significantly more abundant in above ground, refined state than silver; and dispite this fact those industrial uses of silver that have reduced it’s bullion volume do not drive it’s value anywhere near gold’s market value. This is because gold’s market value is a direct result of it’s desirablity as a store of value, while silver’s value is largely due to it’s industrial demand. Said another way, it’s gold’s monetary utiltity that dominates gold’s market value. Few market players care that gold has any industrial utility at all, they desire it for monetary purposes, and so do you.
Bitcoin has value because, and only because, of it’s monetary utility; and it’s better than gold at that, even though it’s not valued that way by the general public. What do you think would happen to bitcoin’s market value if nearly as many people viewed bitcoin in the same light as gold? I’m not claiming that will ever happen, but if it did I think that you know that bitcoin’s value would be comparable to that of gold’s, if not higher due to it’s inherent security and distance transfer costs. On the Internet, no one cares what color your digital gold certificates are.
Twice confirmed. No, the counterparty is often not the other person in the current transaction. Please research the term before you mangle it again.
Again, no. That is not what a “counterparty risk” refers to.
Oh, there are risks, but you are using one term that refers to a particular type of risk, and you are using it incorrectly. Certainly there is a risk that when I send bitcoin to someone over the Internet that I won’t get the services that I have paid for, but this is a fraud risk, not a counterparty risk. Please look up these terms.
Bitcoin is both a currency & a distance transfer service. I can & have acknowledged this. I don’t need to argue over the fine points of things until you can manage to get the semantics correct.
True but inmaterial. The service orientated nature of the bitcoin network is not relevent to the question of counterparty risk.
False, people pay for bitcoins for the expectation of being able to trade them for value in the future, and generally over the Internet and not in person. The processes of cryptographic work performed do not provide for that value beyond the notable fact that they are required to maintain the security (and therefore the trustworthiness) of the transfer network.
That question didn’t parse. Cound you rephrase it?
Bticoin has already had a bubble & crash, and it didn’t kill it. I’m not banking on anything. If gold crashes down to it’s submarginal uses, I’ll buy your’s for slightly more than lead, and use it to make non-toxic hunting bullets. You’re still not going to be happy with what you could trade it for, and the fact that gold cannot drop to zero value while bitcoin could would be of little comfort.
Okay, your failure to explain yourself is because I can’t be bothered to understand the concepts that particular words represent. You just keep telling yourself that, but don’t forget to pick up an economic textbook and try to find the term “counterparty risk” while you do so.
the primary reason why people use money is that it reduces transaction costs. Bitcoin reduces transaction costs. It can only be replaced by something that reduces transaction costs even more. A system based on money substitutes piggybacking on either fiat or gold cannot compete with a cryptocurrency, becacause the maintenance of money substitutes does not only have costs associated with the clearing system, but also with storage and redemption of the specie.
The internet also reduces transaction costs and it is unlikely that it will be replaced by post offices, coaches, trains or libraries unless there is a catastrophic failure.
Its amazing that I looked up the terms and I’m still correct. “Counterparties” are other people one has agreements with. “counterparty risk” is the risk that they wont do what they said they will do. The technical term for the risk that your crypto doesnt get computed is “counterparty risk.” keep waving your hands, no one cares.
thats why they use exchange media for exchange. They use money because they dont trust counterparties. They use money for savings because they want to preserve their wealth and be able to transact with it when necessary with a minimum of fuss.
Counterparty is legal term, not a technological one. With money, It means that a contract depends on legal obligations of someone who is not directly involved in a transaction. The operators of Bitcoin nodes and miners have no obligation to process your transaction, so they are not a counterparty. If you for example pay with a cheque and your car breaks down while driving to the bank to cash it, that is not a counterparty risk, that’s a technological issue.
The primary purpose of money is not saving, but transacting. The ability to use money for saving is a derivative of the medium of exchange.
Language is defined by usage, every transaction has a minimum of two parties, if you are a party to a transaction, you have a counterparty and this embodies risk. Quit trying to be semantic dictators.
if you get paid with a check and on your way to the bank, the only physical location of the bank gets hit by a meteor and is physically unable to cash your check, thats intermediary counterparty risk, just as if people refused or were unable to compute cryptographic patterns for you.
paradoxically you in the same sentence show my point. What I meant is that counterparty risk refers to the legal, not technological, aspect of transactions.
And what I mean is that you are wrong. When people use coal or oil as a medium of exchange, they can use the money themselves. When they use dollars or checks or bitcoins, they are trusting an other party to do something in the future. This involves risk, the risk that the other party (counterparty) will not perform as expected. Hence “counterparty risk.”
you know, there is something of a meritocracy here, in that to deny someone the use of a term you have to make a case. That can be as simple as appealing to a reference, or it can be a logical exposition (the case against “purebred mix” comes to mind). Its funny that you guys are appealing to your own fiat for this one.
You are wrong, because you’re misrepresenting techonlogical issues as legal ones. If the technology develops to the extent that we have bots operating at quantum level (like in The Quantum Thief), they can disassemble your gold or coal and you wouldn’t be able to use it anymore. But that’s not a counterparty risk, that’s a technological issue.
Also, I cannot use gold myself. In order to validate whether it’s really gold, I would need to either hire someone to verify its authenticity, or to read upon how it’s done, get the materials and so on. This requires cooperation of many third parties, yet it’s not a counterparty risk, it’s a technological risk.